Mad Hedge Technology Letter
July 22, 2019
(DOES ARTIFICIAL INTELLIGENCE WORK FOR YOU?),
(TSLA), (AMZN), (FB)
Mad Hedge Technology Letter
July 22, 2019
(DOES ARTIFICIAL INTELLIGENCE WORK FOR YOU?),
(TSLA), (AMZN), (FB)
Anti-A.I. physicist Professor Stephen Hawking was a staunch supporter of preserving human interests against the future existential threat from machines and artificial intelligence (A.I.).
He was diagnosed with motor neuron disease, more commonly known as Lou Gehrig’s disease, in 1963 at the age of 21 and sadly passed away March 14, 2018 at the age of 76.
Famed for his work on black holes, Professor Hawking represented the human quest to maintain its superiority against quickly advancing artificial acculturation.
His passing was a huge loss for mankind as his voice was a deterrent to A.I.’s relentless march to supremacy. He was one of the few who had the authority to opine on these issues. Gone is a voice of reason.
Critics have argued that living with A.I. poses a red alert threat to privacy, security, and society as a whole. Unfortunately, those most credible and knowledgeable about A.I. are tech firms. They have shown that policing themselves on this front is remarkably unproductive.
Mark Zuckerberg, CEO of Facebook (FB), has labeled naysayers as “irresponsible” and dismissed the threat. After failing to prevent Russian interference in the last election, he is exhibiting the same defensive posture translating into a de facto admission of guilt. His track record of shirking accountability is becoming a trend.
Share prices will materially nosedive if A.I. is stonewalled and development stunted. Many CEOs who stake careers on doubling or tripling down on A.I. cannot see it die out. There is too much money to lose.
The world will see major improvements in the quality of life in the next 10 years. But there is another side to the coin which Zuckerberg and company refuse to delve into…the dark side of technology.
Defective Amazon (AMZN) Alexa recently produced unexplained laughter because of a mistaken command to start laughing. Despite avoiding calamity, these small events show the magnitude of potential chaos capable of haywire A.I. functions. If one day a user attempts to order a box of tissues and Alexa burns down the house, who is liable?
Tesla’s (TSLA) CEO Elon Musk has shared his anxiety about robots flipping the script on humans. Musk acknowledges that A.I. and autonomous vehicles are important factors in the battle for new technology.
The winner is yet to be determined as China has bet the ranch with unlimited resources from Chairman Xi.
The quagmire with China has been squarely centered around the great race for technological supremacy.
A.I. is the ultimate X factor in this race and whoever can harness and develop the fastest will win.
Musk has hinted that robots and humans could merge into one species in the future.
Is this the next point of competition among tech companies? The future is murky at best.
Bill Gates noted that robots should be taxed like humans.
This reflects the bubble in which the ultra-elite reside.
This comment implies that humans and robots are at the same level. It shows a severe lack of empathy for the 40% of working Americans who will be replaced by machines over the next 10 years.
The West is comprised of a deeply hierarchical system of winners and losers. Hawking’s premise that evolution has inbuilt greed can be found in the underpinnings of America’s economic miracle.
Wall Street has bred a culture that is entirely self-serving regardless of the bigger system in which it finds itself.
Most of us are participating in this perpetual money game chase because our system treats it as a natural part of life.
A.I. will help more people do well in this paper chase to the detriment of the majority.
Quarterly earnings performance is paramount for CEOs.
Return value back to shareholders, or face the sack in the morning.
It’s impossible to convince anyone that America’s capitalist model is deteriorating in the greatest bull market of all time.
Wall Street has an insatiable hunger for cutting-edge technology from companies that sequentially beat earnings and raise guidance.
Flourishing technology companies enrich the participants creating a Teflon-like resistance to downside market risk.
The issue with Professor Hawking’s work is that his timeframe is too far in the future.
Professor Hawking was probably correct, but it will take 25 years to prove it.
The world is quickly changing as science fiction becomes reality.
The year 2020 will signal the real beginning of A.I. in tangible form when autonomous fleets flood main streets and is another step in the direction of human’s overreliance on machines.
People on Wall Street are a product of the system in place and earn a tremendous amount of money because they proficiently execute a specialized job.
Traders are busy focusing on how to move ahead of the next guy.
Firms building autonomous cars are free to operate as is.
Hyper-accelerating technology spurs on the development of A.I., machine learning, and enhanced algorithms.
Record profits will topple, and investors will funnel investments back into an even narrower grouping of technology stocks after the weak hands are flushed out.
Professor Hawking said we need to explore our technological capabilities to the fullest in order to avoid extinction.
In 2019, exploring these new capabilities still equals monetizing through the medium of products and services.
This is all bullish for equities as the leading companies associated with A.I. have a red carpet laid out in front of them.
And let me remind you that technology is still the least regulated industry on the planet even if sentiment has pivoted this year.
The only solution is keeping companies accountable by a function of law or creating a third-party task force to regulate A.I.
In 2019, the thought of overseeing robots sounds crazy.
However, by 2020, it might be as normal as uncontrollable laughter from your smart home device.
“The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge,” said the late Professor Stephen Hawking.
Mad Hedge Technology Letter
July 19, 2019
(AMZN), (MSFT), (GOOGL), (DOCU), (CRM), (ZS)
If you’ve been living under a rock the past few years, the cloud phenomenon hasn’t passed you by and you still have time to cash in.
You want to hitch your wagon to cloud-based investments in any way, shape or form.
Amazon leads the cloud industry it created.
It still maintains more than 30% of the cloud market. Microsoft would need to gain a lot of ground to even come close to this jewel of a business.
Amazon (AMZN) relies on AWS to underpin the rest of its businesses and that is why AWS contributes most of Amazon’s total operating income.
Total revenue for just the AWS division would operate as a healthy stand-alone tech company if need be.
The future is about the cloud.
These days, the average investor probably hears about the cloud a dozen times a day.
If you work in Silicon Valley, you can triple that figure.
So, before we get deep into the weeds with this letter on cloud services, cloud fundamentals, cloud plays, and cloud Trade Alerts, let’s get into the basics of what the cloud actually is.
Think of this as a cloud primer.
It’s important to understand the cloud, both its strengths and limitations.
Giant companies that have it figured out, such as Salesforce (CRM) and Zscaler (ZS), are some of the fastest growing companies in the world.
Understand the cloud and you will readily identify its bottlenecks and bulges that can lead to extreme investment opportunities. And that’s where I come in.
Cloud storage refers to the online space where you can store data. It resides across multiple remote servers housed inside massive data centers all over the country, some as large as football fields, often in rural areas where land, labor, and electricity are cheap.
They are built using virtualization technology, which means that storage space spans across many different servers and multiple locations. If this sounds crazy, remember that the original Department of Defense packet-switching design was intended to make the system atomic bomb proof.
As a user, you can access any single server at any one time anywhere in the world. These servers are owned, maintained and operated by giant third-party companies such as Amazon, Microsoft, and Alphabet (GOOGL), which may or may not charge a fee for using them.
The most important features of cloud storage are:
1) It is a service provided by an external provider.
2) All data is stored outside your computer residing inside an in-house network.
3) A simple Internet connection will allow you to access your data at anytime from anywhere.
4) Because of all these features, sharing data with others is vastly easier, and you can even work with multiple people online at the same time, making it the perfect collaborative vehicle for our globalized world.
Once you start using the cloud to store a company’s data, the benefits are many.
Many companies, regardless of their size, prefer to store data inside in-house servers and data centers.
However, these require constant 24-hour-a-day maintenance, so the company has to employ a large in-house IT staff to manage them – a costly proposition.
Thanks to cloud storage, businesses can save costs on maintenance since their servers are now the headache of third-party providers.
Instead, they can focus resources on the core aspects of their business where they can add the most value without worrying about managing IT staff of prima donnas.
Today’s employees want to have a better work/life balance and this goal can be best achieved by letting them telecommute. Increasingly, workers are bending their jobs to fit their lifestyles, and that is certainly the case here at Mad Hedge Fund Trader.
How else can I send off a Trade Alert while hanging from the face of a Swiss Alp?
Cloud storage services such as Google Drive offer exactly this kind of flexibility for employees. According to a recent survey, 79% of respondents already work outside of their office some of the time, while another 60% would switch jobs if offered this flexibility.
With data stored online, it’s easy for employees to log into a cloud portal, work on the data they need to, and then log off when they’re done. This way a single project can be worked on by a global team, the work handed off from time zone to time zone until it’s done.
It also makes them work more efficiently, saving money for penny-pinching entrepreneurs.
Better Collaboration and Communication
In today’s business environment, it’s common practice for employees to collaborate and communicate with co-workers located around the world.
For example, they may have to work on the same client proposal together or provide feedback on training documents. Cloud-based tools from DocuSign, Dropbox, and Google Drive make collaboration and document management a piece of cake.
These products, which all offer free entry-level versions, allow users to access the latest versions of any document so they can stay on top of real-time changes which can help businesses to better manage workflow, regardless of geographical location.
Another important reason to move to the cloud is for better protection of your data, especially in the event of a natural disaster. Hurricane Sandy wreaked havoc on local data centers in New York City forcing many websites to shut down their operations for days.
The cloud simply routes traffic around problem areas as if, yes, they have just been destroyed by a nuclear attack.
It’s best to move data to the cloud to avoid such disruptions because there your data will be stored in multiple locations.
This redundancy makes it so that even if one area is affected, your operations don’t have to capitulate, and data remains accessible no matter what happens. It’s a system called deduplication.
The cloud can save businesses a lot of money.
By outsourcing data storage to cloud providers, businesses save on capital and maintenance costs, money that in turn can be used to expand the business. Setting up an in-house data center requires tens of thousands of dollars in investment, and that’s not to mention the maintenance costs it carries.
Plus, considering the security, reduced lag, up-time and controlled environments that providers such as Amazon’s AWS have, creating an in-house data center seems about as contemporary as a buggy whip, a corset, or a Model T.
“Life is not fair; get used to it,” said the founder of Microsoft Bill Gates.
Global Market Comments
July 17, 2019
(THE LEADER OF THE PACK),
The future is coming a lot faster than anyone expected.
Waymo, once the top-secret Alphabet autonomous driving subsidiary, has beaten all comers to the punch.
The desert state of Arizona granted a permit for it to commence with their autonomous fleet as a commercial entity and the business has rolled out to select riders.
This permit means that Waymo’s futuristic robo-taxi can charge passengers for profit.
The vehicles started testing in 2017 and were monitored with a human safety engineer inside. This is a big deal from a regulatory point of view.
First mover advantage is pivotal in dictating an agenda and setting the rules of the road in the world of innovation.
The desperation of being first to market was epitomized by an email that former top engineer Chris Urmson sent Alphabet founders Larry Page and Sergey Brin, “We have a choice between being the headline or the footnote in history’s book on the next revolution in transportation. Let’s make the right choice.”
Waymo, a subsidiary of Alphabet (GOOG), is the preeminent force in the quest for mass market driver-less vehicles.
Before Waymo was coined, Google’s self-driving-car research was an internal program referred to as Project Chauffeur. The project was created in 2009, hidden from the public eye to keep its technology safeguarded from intruders.
Alphabet invested at least $1.1 billion between 2009 and 2015 to grab the undisputed lead position of this newly created industry.
Most industry analysts estimate that commercialization of level 4 self-driving vehicles will occur sometime around 2020.
The time sensitivity is palpable as Waymo has a chance to flood American streets with its technology before GM (GM) or Uber can get off the starting blocks.
Waymo outmuscled its opponents reaching a Level 3 standard in 2012.
Level 4 is the grade that automakers wish to proceed with. Although not fully Level 5 automated, Level 4 technology can operate under controlled factors without a driver.
The Fiat Chrysler minivans tricked out with Waymo technology have been racking up test miles in Phoenix, Arizona to the tune of around 5 million on Level 4 technology.
Arizona has been a fertile breeding ground for driver-less car development since 2015 when Governor Doug Ducey signed an executive order giving authority to state agencies to “undertake any necessary steps to support the testing and operation of self-driving vehicles on public roads within Arizona.”
The success or failure in Arizona will go a long way to test the quality and sustainability of this new phenomenon.
It helps a lot that Phoenix streets are laid out in a simple grid that the current level of artificial intelligence finds easy to recognize and understand.
Waymo is essentially Uber with no driver.
Drivers cost money. Waymo hopes to remove the highest input in ride sharing transport – the driver itself.
Uber routinely shells out driver subsidies equating to around 72% of quarterly gross revenue.
Waymo plans to expand its coverage to other locations.
Google CFO Ruth Porat has gone on record saying “We do continue to explore a range of options beyond the program we’re piloting in Phoenix, including ride sharing and personal use vehicles, logistics, deliveries, and working with cities to help them address public transportation objectives.”
The first commercial operation has been groundbreakingly successful in Arizona and is crucial to enhance consumer sentiment for reliable driver-less vehicles.
The accumulated data will be vital to prove Waymo’s safety record.
If all goes smoothly, Waymo’s autonomous vehicles and technology will spread like wildfire to other locations.
The potential success will fundamentally change the way people live their lives.
Up to 10 million employed drivers are set to be on the chopping block in America.
That includes about 3.5 million professional truck drivers who earn between $30,000-$45,000 per year along with 2 million Uber/Lyft drivers participating in the gig economy at $7.25 an hour.
The mass adoption of autonomous vehicles will eliminate a huge chunk of the American workforce, while redrawing additional income streams to Alphabet (GOOG).
Insurance companies would take a direct hit with the future pipeline of drivers irrevocably thwarted from learning how to drive.
If the preliminary data comes up roses, parents will not allow their 16-year-old kid to learn how to drive and instead throw them into a Waymo to be chauffeured to school.
Also, the tragic 40,000 annual fatalities caused by motor vehicle crashes will drop off a cliff.
The pick up in productivity would be astounding as workers will no longer need to drive themselves anymore, cutting costs and allowing additional time to work while in transit.
The unintended consequences will change the world while making the leaders of the space richer. A deeper underlying effect is that it will strengthen (GOOG)’s credentials going forward to apply A.I. in other spheres.
“If you do build a great experience, customers tell each other about that. Word of mouth is very powerful.” – Said Founder and CEO of Amazon Jeff Bezos
Mad Hedge Technology Letter
July 15, 2019
(HOW SOFTBANK IS TAKING OVER THE US VENTURE CAPITAL BUSINESS),
(SFTBY), (BABA), (GRUB), (WMT), (GM), (GS)